Financial Reporting and Analysis

Module description

This module is intended for Financial Services Degree Apprenticeship students who are looking to develop a sound knowledge in financial reporting and financial statement analysis. The module provides a framework for guiding the financial statement analysis process. Students will learn how to examine the past and current performance and financial position of a company in order to form expectations about its future performance and financial position. An examination of performance can include an assessment of a company’s profitability and its ability to generate positive cash flows as well as factors that affect risks to a company’s future performance and financial position.

Full module specification

Module aims

This module is designed to provide a general overview on the roles of financial reporting and financial statement analysis. The roles of the statement of financial position, statement of comprehensive income, statement of changes in equity, and statement of cash flows in evaluating a company’s performance and financial position are presented. You will be able to identify information sources that analysts use in financial statement analysis besides annual financial statements and supplementary information.

Financial analysis tools can be useful in assessing a company’s performance and trends in that performance. Major considerations in both equity analysis and credit analysis are evaluating a company’s financial position, its ability to generate profits and cash flow, and its ability to generate future growth in profits and cash flow. You will be able to use financial reports prepared by companies, combined with other information, to evaluate the past, current, and potential performance and financial position of a company for the purpose of making investment, credit, and other economic decisions.

You will be able to answer such questions as:

• How successfully has the company performed, relative to its own past performance and relative to its competitors?
• How is the company likely to perform in the future?
• Based on expectations about future performance, what is the value of this company or securities it issues?

The module introduces the essential knowledge of financial reporting mechanics, taking the perspective of the user rather than the preparer. Learning the process from this perspective will enable students to grasp the critical concepts of financial analysis. A range of techniques are introduced, including the use of ratios to evaluate corporate financial health.

The module also explains how cash flow activities are reflected in company’s cash flow statement. You will be able to answer such questions as:

• Does the company generate enough cash from its operations to pay for its new investments, or is the company relying on new debt issuance to finance them?
• Does the company pay its dividends to common stockholder’s using cash generated from operations, from selling assets, or from issuing debt?

ILO: Module-specific skills

• 1. Describe tools and techniques used in financial analysis, including their uses and limitations
• 2. Identify the relationships among the income statement, balance sheet, statement of cash flows, and statement of owners’ equity
• 3. Evaluate a company’s past financial performance and explain how a company’s strategy is reflected in past financial performance
• 4. Compare cash flows from operating, investing and financing activities and classify cash flow items to each of these categories
• 5. Calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios.
• 6. Demonstrate the use of the results of the accounting process in security analysis
• 7. Calculate and interpret financial ratios such as liquidity, solvency, leverage and coverage ratios

ILO: Discipline-specific skills

• 8. Apply financial statement analysis in making investment decisions
• 9. Evaluate the implications of inflation and deflation of inventory costs on financial statements
• 10. Identify accounting warning signs and methods for detecting manipulation of information on financial reports

ILO: Personal and key skills

• 11. Develop a sound knowledge of reporting and accounting principles
• 12. Keep up to date with sector relevant legal/regulatory changes
• 13. Understand the impact the external environment has on Financial Services as appropriate to their role, together with relevant best practice.

Learning activities and teaching methods (given in hours of study time)

Details of learning activities and teaching methods

Formative assessment

Summative assessment (% of credit)

Details of summative assessment

Details of re-assessment (where required by referral or deferral)

Re-assessment notes

Defer – as first time

Refer – capped at 40%

Syllabus plan

• Financial Reporting and Analysis: An Introduction
• Financial Reporting Mechanics and Standards
• Understanding Income Statements, Balance Sheets and Cash Flow Statements
• Financial Analysis Techniques
• Inventories, Long-Lived Assets, Income Taxes, Non-Current (Long-Term) Liabilities
• Financial Reporting Quality
• Financial Statement Analysis: Applications

Indicative learning resources - Basic reading

Basic reading:

• Financial Reporting & Analysis, CFA® Program Curriculum Level I Volume 3.

Module has an active ELE page?

Yes

Origin date

28/02/2019

Last revision date

15/03/2019